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All's not well when the oil runs dry

With global oil reserves set to run out within decades, governments must act now to avoid an energy crisis of indescribable proportions, writes Claire Miller.

IT WAS a party that had to end. Even the optimists predict that by 2030, the global oil supply will no longer match demand. The International Energy Agency's prediction is a sobering one. For price, quality and the security of supply, the hangover is already setting in.

So much for the optimists. According to respected pessimists such as the UK-based Oil Depletion Analysis Centre, production will peak within the next decade and then fall away. It says even the most conservative independent analysis, based on optimistic assessments of oil reserves, estimate production will peak by 2020.

Of course, predicting the end of the oil era is like asking how long is a piece of string. In 1956, American geophysicist M. King Hubbert famously predicted in a paper presented to the American Petroleum Institute that world oil production would peak in 2000. The milestone passed without any sign of a slowdown, thanks to new fields being discovered, more efficient use of oil and technological advancements opening up sources previously out of reach or uneconomic to exploit.

But the bottom line is still that oil is a finite resource, and geology determines supply. In both number and size, new discoveries have been declining steadily for 40 years, while annual consumption has soared; by 2002, the world was burning four times more oil than it was finding in new reserves.

Significantly, Colin Campbell, a former oil industry executive, has calculated that "conventional" oil — the sweet stuff that is easy to extract and cheap to refine — peaked 18 months ago. That means increasingly relying on low-quality, heavy oils and oil sands to maintain supply levels. These sources are more expensive to extract and process, which means even higher prices at the bowser, not to mention higher greenhouse emissions from the heavier fuels.

Security of supply is also uncertain. Production from fields in the United States peaked in 1971. The North Sea began falling away in 2001, following Central America in the late 1990s. It means relying on the Middle East and the notoriously volatile Caucasus to make up the difference, until they, too, start falling away, perhaps as early as 2015.

Robert Hirsch, a consultant to the US Department of Energy, agrees the peak is coming sooner rather than later (within 20 years) and he warns that, unlike past and present oil shocks, as in the 1970s and hurricanes Katrina and Rita, the associated economic, social and political problems will be permanent.

It could be the end of the world as we know it, but as one of the optimists in this debate, Hirsch says the problems are not insoluble. All that is required is governments intervening with "timely, aggressive initiatives" over the next 20 years, such as upgrading transport efficiencies and substitute fuels. The cost? "Literally trillions of dollars and … many years of intense effort."

In other words, rather more than announcing last week that Australia's petrol might be diluted with a bit of ethanol by 2010.

Editorial Notes: Claire Miller notes when Hubbert was wrong but not when he was right, omits the significance of production peak over 'running out', and misreads Robert Hirsch. But its probably not her fault that The Age website (wrongly!) implies Mr Hirsch works for Energybulletin (he works for US Defence contractor SAIC, and the report Ms Miller alludes to was commissoned by the USDoEnergy). Interestingly, Ms Millers Fairfax Media stablemate over at the (more blue collar) Sun-Herald, Rachael Wells, has a strikingly similar-but-different article that leaves out all the useful parts of the story. It explains why so many things rising in price with oil, but not why oil price is rising or what we might do about it. Mentions the Oil Depletion Analysis Centre, but not their great work on MegaProjects and the 'pessimistic' implications for oil production peak. Are blue collar readers really less interested in the whole story? -LJ

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